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Grid Dynamics Reports Third Quarter 2023 Financial Results
Nov 2, 2023

Grid Dynamics Reports Third Quarter 2023 Financial Results

Revenue of $77.4 million and GAAP Net Income of $0.7 million

San Ramon, Calif. November 2, 2023 Grid Dynamics Holdings, Inc. (NASDAQ:GDYN) (“Grid Dynamics” or “Company”), a leader in enterprise-level digital transformation, today announced results for the third quarter ended September 30, 2023.

We are very pleased to report the third quarter 2023 revenue of $77.4 million. Our non-retail industry verticals represented 65.7% of revenue in the third quarter of 2023, a decrease of 0.8% on a sequential basis and 9.0% on a year-over-year basis. Totaling 34.3% of our third quarter revenue, Retail was our largest vertical and grew 2.0% and 5.1% on a sequential and year-over-year basis, respectively. Our Technology, Media and Telecom (“TMT”) vertical, at 30.7% of our third quarter revenue, decreased 1.5% on a sequential basis and 9.9% on a year-over-year basis. Our Finance vertical, representing 9.4% of our third quarter revenue, grew 8.2% on a sequential basis and 20.2% on a year-over-year basis and this was largely due to growth from Financial Technology customers and new logos. Our CPG and Manufacturing vertical, representing 12.5% of our third quarter revenue, a decrease of 11.1% and 39.8% on a sequential basis and a year-over-year basis, respectively.

“Our third quarter results reflect the company’s strong commitment to our clients and ability to execute to our stated goals. There were many positive trends in the quarter. We signed ten new enterprise customers bringing the total to 28 since the beginning of the year. Our AI capabilities continue to garner significant interest and during the quarter we completed multiple projects across industry verticals. At new and existing customers, our AI success has led us to incremental digital transformation opportunities beyond AI. On the demand environment, I am incrementally positive. Some of the key reasons include a steady rise in billable headcount, our core business is picking up, and contributions from our recent customer wins grow. Although the macro environment impacts customers at varying levels, our fourth quarter outlook reflects improving trends. On November 16th, 2023 Grid Dynamics will host its first investor day in New York City. We look forward to providing you all with a deeper dive into our technological capabilities including AI, our global delivery footprint, and our plans around the Company’s  GigaCube strategy,” said Leonard Livschitz, CEO.

Third Quarter of 2023 Financial Highlights

  • Total revenue was $77.4 million, flat on a year-over-year basis.
  • GAAP gross profit was $28.2 million or 36.4% of revenue in the third quarter of 2023, compared to GAAP gross profit of $32.7 million or 40.3% of revenue in the third quarter of 2022. Non-GAAP gross profit was $28.7 million or 37.0% of revenue in the third quarter of 2023, compared to Non-GAAP gross profit of $33.0 million or 40.7% of revenue in the third quarter of 2022.
  • GAAP Net Income attributable to common stockholders was $0.7 million, or $0.01 per share, based on 75.5 million basic weighted-average common shares outstanding in the third quarter of 2023, compared to GAAP Net loss of $6.7 million, or $(0.10) per share, based on 68.6 million basic weighted-average common shares outstanding in the third quarter of 2022. Non-GAAP Net income was $5.9 million, or $0.08 per diluted share, based on 77.3 million diluted weighted-average common shares outstanding in the third quarter of 2023, compared to Non-GAAP Net income of $11.0 million, or $0.15 per diluted share, based on 71.9 million diluted weighted-average common shares outstanding in the third quarter of 2022.
  • Non-GAAP EBITDA (earnings before interest, taxes, depreciation, amortization, other income and expenses, fair value adjustments, stock-based compensation, transaction and transformation-related costs, restructuring costs as well as geographic reorganization expenses), a non-GAAP metric, was $10.7 million in the third quarter of 2023 compared to Non-GAAP EBITDA of $17.1 million in the third quarter of 2022.

See “Non-GAAP Financial Measures” and “Reconciliation of Non-GAAP Information” below for a discussion of our non-GAAP measures.

Cash Flow and Other Metrics

  • Cash provided by operating activities was $33.5 million for the nine months ended September 30, 2023, compared to cash provided by operating activities of $19.6 million for the nine months ended September 30, 2022. 
  • Cash and cash equivalents totaled $253.7 million as of September 30, 2023, compared to $256.7 million as of December 31, 2022. 
  • Total headcount was 3,823 as of September 30, 2023, compared with 3,746 employees as of September 30, 2022.

Financial Outlook

  • The Company expects its fourth-quarter outlook to be similar to the third quarter outlook provided in August 2023 for both revenue and Non-GAAP EBITDA. Revenue in the fourth quarter of 2023 is expected to be between $76 million and $78 million and Non-GAAP EBITDA is expected to be between $10 million and $11 million.
  • For the fourth quarter of 2023, we expect our basic share count to be in the 76-77 million range and diluted share count to be in the 78-79 million range.

Grid Dynamics is not able, at this time, to provide GAAP targets for net income for the fourth quarter of 2023 because of the difficulty of estimating certain items excluded from Non-GAAP EBITDA that cannot be reasonably predicted, such as interest income, taxes, other income/(expenses), fair-value adjustments, geographic reorganization expenses, restructuring expenses, transaction-related costs and charges related to stock-based compensation expense. The effect of these excluded items may be significant.

Conference Call and Webcast

Grid Dynamics will host a video conference call at 4:30 p.m. ET on Thursday, November 2, 2023 to discuss its third quarter financial results. Investors and other interested parties can access the call in the following ways: A webcast of the video conference call can be accessed on the Investor Relations section of the Company’s website at https://griddynamics.com/investors.

A replay will also be available after the call at https://griddynamics.com/investors with the passcode $Q3@2023.

About Grid Dynamics

Grid Dynamics (Nasdaq: GDYN) is a digital-native technology services provider that accelerates growth and bolsters competitive advantage for Fortune 1000 companies. Grid Dynamics provides a range of digital transformation consulting and implementation services that includes artificial intelligence, big data, analytics, search, and cloud and DevOps. Grid Dynamics achieves high speed-to-market, quality, and efficiency by using technology accelerators, an agile delivery culture, and its pool of global engineering talent. Founded in 2006, Grid Dynamics is headquartered in Silicon Valley with offices across the globe, including US, Europe, UK, India, Mexico and Jamaica.

To learn more about Grid Dynamics, please visit griddynamics.com. Follow us on Facebook and LinkedIn.

Non-GAAP Financial Measures

To supplement the financial measures presented in Grid Dynamics press release in accordance with generally accepted accounting principles in the United States (“GAAP”), the Company also presents Non-GAAP measures of financial performance.

A “non-GAAP financial measure” refers to a numerical measure of Grid Dynamics historical or future financial performance or financial position that is included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. Grid Dynamics provides certain non-GAAP measures as additional information relating to its operating results as a complement to results provided in accordance with GAAP. The non-GAAP financial information presented herein should be considered in conjunction with, and not as a substitute for or superior to, the financial information presented in accordance with GAAP and should not be considered a measure of liquidity and profitability.

Grid Dynamics has included these non-GAAP financial measures because they are financial measures used by Grid Dynamics’ management to evaluate Grid Dynamics’ core operating performance and trends, to make strategic decisions regarding the allocation of capital and new investments and are among the factors analyzed in making performance-based compensation decisions for key personnel.

Grid Dynamics believes the use of non-GAAP financial measures, as a supplement to GAAP measures, is useful to investors in that they eliminate items that are either not part of core operations or do not require a cash outlay, such as stock-based compensation expense. Grid Dynamics believes these non-GAAP measures provide investors and other users of its financial information consistency an